2020 Will Confirm BTC’s Transition to Gold, Currently Marking Time Before Following the Bull Market: Bloomberg
- The shakeout discounts alongside stock market solidify BTC and gold foundations
- COVID-19 distinguishes bitcoin from rest of cryptos, unprecedented QE to boost price
- Bitcoin transition to the gold bull from S&P bear
Bloomberg Crypto Outlook for April titled “Bitcoin Maturation Leap” talks about a bright future ahead for the leading digital currency.
As per the report, Bitcoin is becoming less of a risk-on asset despite being bottoming with a decline of 45%, the same time as the stock market which declined 14%. Though still susceptible to the receding stock-market tide, Bloomberg’s outlook is that this is
“in more of a bullish divergent condition.”
As a matter of fact, 2020 is a key test for Bitcoin’s transition towards a quasi-currency like gold and Bloomberg expects BTC to pass.
Favorable Bitcoin Indicators
On-chain indicators of the Bitcoin network remain price supportive and the coronavirus is also accelerating its outperformance vs. the broader crypto market.
COVID-19 also distinguished Bitcoin from the rest of the market as the macroeconomic effects of the virus accelerate the digital asset's process of gaining value relative to other cryptos.
Growing addresses used and adjusted transactions showing a firm bitcoin foundation. Reduction in daily mining supply next month will provide another price tailwind, states Bloomberg.
Margin-call related selling should be temporary while increasing address support BTC’s transition toward a digital version of gold and robust transaction of increasing adoption.
Volatility Favors Bitcoin
As we saw these past few weeks, while the stock market’s volatility is on the rise, Bitcoin’s is decreasing which may tilt performance bias toward crypto. For the nascent crypto, it’s not only a sign of divergent strength but also an indication of transition towards gold-like adoption, maturity, and performance.
Historically, divergent volatility has supported price appreciation in BTC. Unlike its more volatile days, the “first-born crypto” trend is now towards gold-like price action.
Gold’s volatility is also rising as opposed to bitcoin’s declining which yet again supports the latter's price. The same scenario happened in 2015 when the
“Bitcoin-to-gold ratio bottomed and commenced the bull market to the 2017 peak.”
“Bitcoin a Resting Bull Amid Equity Plunge”
Not like the stock market but similar to gold’s, Bitcoin had its shakeout amidst the unprecedented global monetary stimulus and increasing adoption. Both are reportedly on the back ends of significant shakeouts.
This shakeout in equities, according to the report, is supportive of the price appreciation in BTC and gold, both of which appear to be consolidating bull markets.
“Bitcoin and gold also stand to be primary beneficiaries of the unprecedented monetary stimulus that's accompanied by a mean-reverting stock market.”
This year, Bloomberg is actually expecting to confirm bitcoin’s transition from a risk-on speculative asset to the crypto market's version of gold.
Bitcoin’s correlation to gold has also risen to all-time highs, twice the Bitcoins’ relationship with equities. And QE further supports the quasi currencies with zero and negative base rates favorable to gold which is expected to climb to $1,900 peak.
Bitcoin meanwhile has returned to the prime consolidation area of 2018 at about $6,000 and
“appears to be marking time before following the gold bull market.”
Futures Tame the Bitcoin Bull
According to Bloomberg, listed futures actually helped tame the raging bitcoin bull market and is further part of its gold-like transition process.
For a nascent digital asset with limited supply, increasing futures open interest and volume are key as it represents mainstream adoption that keeps pressuring volatility. And,
“increasing futures open interest, declining volatility, and relative outperformance despite the stock-market shakeout indicates Bitcoin is maturing from a speculative crypto asset toward a digital version of gold.”